How the India-EU FTA will level the playing field for the textile and apparel industry

For many garment industry insiders who have navigated the ebb and flow of global supply chains for years, witnessing the formal signing of the India-EU Free Trade Agreement (FTA) on 27th January 2026 seems like the dawn of a new era. For decades, Indian exporters felt as if one hand was tied behind their backs as they faced stiff tariffs while neighbouring countries like Bangladesh and Vietnam enjoyed preferential access to important markets such as the European Union. This commentary explores the most important shifts that this deal will likely bring to the textile and apparel landscape in India and the EU.

Leveling the global playing field

For the first time in nearly 20 years, the “tariff wall” that separated Indian craftsmanship from European shop floors has crumbled. Historically, Indian garments faced import duties ranging from 4 to 12 percent: 9.6 to 12 percent for ready-made garments (RMG), 4 to 10 percent for cotton fabrics, 12 percent for manmade fibres (MMF), 6 to 12 percent for home textiles like linen and towels and 8 to 12 percent for technical textiles.

After all, it is not only about price; it is about parity. “The zero-duty access of Indian garments and clothing to the EU market will decisively turn the tables in India's favour, enhancing our competitiveness in the European market,” commented A. Sakthivel, chairman of the Apparel Export Promotion Council (AEPC), which is sponsored by the Indian Ministry of Textiles, according to The Secretariat.

Beyond the finished garment, the FTA impacts the entire farm-to-fashion value chain. Exporters of yarn and fabric, who previously faced disadvantageous duties, now see a clear path to market. The Indian Cotton Textiles Export Promotion Council (Texprocil) has long sought this zero-duty access, stating that such a deal would "restore competitiveness, strengthen farmer-linked value chains and significantly enhance India's footprint in the EU market,” as stated in The Hindu.

In addition, while India has always been a cotton powerhouse, the FTA encourages a shift toward high-value MMFs and technical textiles: The removal of the 12 percent tariff on MMF apparel allows Indian designers to compete in the performance-wear and activewear segments. As Sammir Dattani, executive director of yarn manufacturer Sanathan Textiles, explained to Textile Excellence, the deal serves as a “strategic inflection point” that directly enhances cost competitiveness across diverse end-use segments, including automotive and technical fabrics.

Restoring export momentum at a crucial time

The Indian apparel and textile industry is optimistic, backed by aggressive growth projections. With the EU standing as India’s second-largest export destination after the US, the removal of barriers is expected to act as a massive multiplier for order volumes. Industry leaders are already forecasting a doubling of shipments: “This deal will provide a significant boost to apparel exports, which are expected to double in the next three years,” according to Sakthivel as quoted in The Economic Times.

The timing of this FTA is critical, especially in view of the staggering 50 percent tariffs recently imposed in the US market. By securing the European corridor, Indian manufacturers are diversifying their risk. “Duty-free access provides a significant opportunity, particularly in light of the challenges we are facing in the US,” confirmed Sivaramakrishnan Ganapathi, managing director of Gokaldas Exports, a global garment manufacturer and exporter from Bengaluru, according to The Economic Times. He added that while Europe will not fully replace the US, it offers “timely relief”.

Empowering small and medium enterprises

But not only the big players will profit - the soul of the Indian textile and garment industry lies in clusters like Tiruppur, Bengaluru and Noida, where millions of livelihoods depend on strong exports. The FTA is expected to be a lifeline for these micro, small and medium enterprises (MSMEs). According to the government’s Press Information Bureau (PIB), the agreement will “boost production, capacity utilisation and employment across labour-intensive MSME clusters,” ensuring that the benefits of global trade filter down to the 45 million people directly employed by the sector.

European buyers are among the most demanding globally when it comes to environmental, social and governance (ESG) standards. Rather than seeing this as a hurdle, Indian industry insiders view the FTA as a recognition for their “green” investments. “The FTA will reward these efforts by opening more markets and strengthening long-term buyer relationships across Europe,” stated K. M. Subramanian, president of the Tiruppur Exporters’ Association (TEA), according to Fibre2Fashion. He specifically mentioned the region's lead in zero-liquid-discharge and solar energy.

Enhancing sourcing predictability

For European brands and retailers, the FTA is not just about lower costs; it is about stability. By integrating Indian suppliers into a formal treaty framework, the “sourcing from India” model becomes more predictable. An article in the Global Textile Times suggests that the agreement “improves regulatory cooperation, customs procedures and long-term market access,” making it easier for European retailers to move away from fast fashion toward more stable, long-term supply partnerships.

The trade deal is a two-way street that benefits the European machinery sector as much as the Indian garment sector. To meet the surge in demand and the stringent quality standards of the EU, Indian mills must modernise, thus industry insiders expect a sharp rise in the import of high-end European textile machinery. This creates a circular economy where Indian manufacturers use European tech to produce garments that are then sold back to European consumers.

The road ahead: implementation and opportunities

While the ink on the agreement may be dry, the real work begins with implementation. According to Rutger Bonsel, managing director of Broekman Logistics India and the India-Netherlands Business Association, the FTA’s impact on logistics and supply chains will be felt in “how supply chains are redesigned, how quickly goods move across borders and how confidently companies invest in cross-border operations”.

The logistics and supply chain expert cautions in a LinkedIn post that “tariff relief alone does not guarantee competitiveness”. For him, logistics performance becomes the decisive factor and companies should ask themselves three crucial questions: Can lead times be shortened? Can inventory be positioned closer to demand? Can total supply chain cost be optimised, not just the duty component?

Another area, in Bonsel’s opinion “one of the most underappreciated achievements of the agreement” lies in customs facilitation and rules of origin (RoO): “Faster, more predictable border processes can reduce time, decrease the local inventory which is needed to serve your market, and enable time-sensitive flows such as spare parts, healthcare products, electronics, and fashion.” The industry must now focus on navigating RoO and ensuring that every factory in the supply chain meets the EU’s evolving traceability requirements.

Rethinking global supply chains

Bonsel also stresses the opportunity that the FTA means when looking beyond goods, namely at services, temporary mobility and digital trade. “By improving market access for services and creating a more predictable digital trade environment, the FTA supports integrated, end-to-end supply-chain models, rather than fragmented handovers between parties,” he states.

Last but not least, the supply chain expert cautions not see this FTA “as India being just a sourcing alternative” or merely a “new market with 1.4 billion consumers”. Given that many of those potential costumers are not (yet) upwardly mobile, “currently the newly opened up market for Mahindra & Mahindra & Tata Motors is actually bigger than the new market for Volkswagen & Renault!” Bonsel believes that given the right execution, the biggest potential is that “India becomes a strategic hub in European and global value chains”.